Global oil supply will not meet total demand this year as the US-Israel war on Iran wreaks havoc on Middle East oil production, the International Energy Agency (IEA) has said in its monthly oil market report, according to Reuters.

“With Hormuz tanker traffic still restricted, cumulative supply losses from Gulf producers already exceed 1 billion barrels with more than 14 million (barrels per day) of oil now shut in, an unprecedented supply shock,” the agency has said.

Its base-case forecast is for a gradual resumption of traffic through the Strait of Hormuz from the third quarter onwards, it has said.

Supply will fall by around 3.9 million bpd across 2026 due to the war, the agency has said, slashed from its previous forecast of a 1.5 million bpd drop.

Meanwhile, the IEA now sees demand falling by 420,000 bpd this year, compared to a previous forecast of an 80,000 bpd drop. Consumption is also under pressure from the war as price spikes lead to demand destruction and slower economic growth, it has added.